Download BTI 2016 | Mexico Country Report

BTI 2016 | Mexico Country Report
Status Index
1-10
6.40
# 41 of 129
Political Transformation
1-10
6.30
# 54 of 129

Economic Transformation
1-10
6.50
# 33 of 129

Management Index
1-10
5.29
# 55 of 129
scale
score
rank
trend
This report is part of the Bertelsmann Stiftung’s Transformation Index (BTI)
2016. It covers the period from 1 February 2013 to 31 January 2015. The BTI
assesses the transformation toward democracy and a market economy as well
as the quality of political management in 129 countries. More on the BTI at
http://www.bti-project.org.
Please cite as follows: Bertelsmann Stiftung, BTI 2016 — Mexico Country
Report. Gütersloh: Bertelsmann Stiftung, 2016.
This work is licensed under a Creative Commons Attribution 4.0 International
License.
BTI 2016 | Mexico
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Key Indicators
Population
M
Pop. growth1
% p.a.
1.3
Life expectancy
years
77.4
UN Education Index
0.638
Poverty3
%
10.3
79.0
Gender inequality2
0.376
Aid per capita $
4.5
Urban population %
125.4
HDI
HDI rank of 187
0.756
71
GDP p.c., PPP $
16949.7
Gini Index
48.1
Sources (as of October 2015): The World Bank, World Development Indicators 2015 | UNDP, Human Development
Report 2014. Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of
population living on less than $3.10 a day at 2011 international prices.
Executive Summary
The period under review coincided with the first two years of the Peña Nieto administration, which
took office in December 2012. Enrique Peña Nieto became the first Institutional Revolutionary
Party (Partido Revolucionario Institucional, PRI) president in 12 years. In contrast to the previous
Calderón administration’s very public “war against organized crime,” the Peña Nieto government
completely ceased publicly discussing organized crime and media coverage of violence had
become minimal (it is unclear if this reduction in media reporting was voluntary or induced). The
focus of the president and media coverage were concentrated on the economic and infrastructure
projects of the new government and on its structural reform initiatives.
At the beginning of Peña Nieto’s presidency, the new government signed a pact, the “Pact for
Mexico,” with the two other main parties in Congress. This pact enabled the passage of reforms
(some of them constitutional) that had been blocked for the past 18 years. Among these were
reforms of the education system, fiscal policy, and, most importantly, the energy sector. For this
policy achievement, Peña Nieto was hailed both domestically and, especially, internationally as a
great political leader. At the time, the general impression was that the PRI was succeeding where
the National Action Party (Partido Acción Nacional, PAN) had failed: both in controlling violence
and advancing major liberalizing reforms.
The administration’s second year, however, resulted in a collapse of this image and (possibly) the
government’s projects. Since the end of 2013, armed self-defense organizations have emerged in
the Mexican state of Michoacán to fight against the criminal gangs that controlled their towns and
villages. These criminal gangs exerted violence that made normal life impossible for many
Michoacanos. In the summer of 2014, the magazine Esquire revealed a massacre in Tlatlaya in
which the army had killed 22 people who had surrendered. National and international public
opinion completely turned with the abduction and assassination of 43 students from a primary
teacher’s school in Ayotzinapa in the Mexican state of Guerrero, one of the poorest, most violent,
BTI 2016 | Mexico
drug infested and gang-controlled regions. The fact that there was a sweeping collaboration
between local politicians, municipal police and a drug gang profoundly shocked the public.
This terrible event has marked the presidency of Peña Nieto and, more generally, Mexico itself.
News of the abduction was followed by three massive public marches demanding that the
government locate the students. These marches represented an impressive mobilization of media,
university students, non-governmental organizations and the general public. The fact that the
Mexican government’s reactions were sluggish, clumsy, and generally insensitive, led to increased
delegitimation of the Peña administration. By November 2014, the events had forced the
government and media to resume a discourse on the persistence of violence and lack of justice in
Mexico. Public perception degraded further when two corruption scandals were revealed that
directly implicated the president’s wife and one of his closest associates (the finance minister).
The end of 2014 also added economic problems to the country’s woes. The economy began to
suffer from a plunge in the price of oil. Though oil represents only a small percentage of the
country’s total exports, it is an important revenue stream in the government’s budget. Nonetheless,
positive prognoses for the U.S. economy also predict economic growth for Mexico.
History and Characteristics of Transformation
The main characteristic of the Mexican regime that endured from 1929 until 2000 was the
existence of a hegemonic state party, the Institutional Revolutionary Party (Partido Revolucionario
Institucional, PRI), which controlled most social organizations. This regime emerged from the
Mexican Revolution (1910 – 1917). Based on the constitution of 1917, the state used the
revolutionary myth as the main source of its legitimacy, using this as a platform for wide-ranging
intervention in the Mexican economy. The three decades starting with the beginning of World War
II were a golden age for Mexico, often referred to as the Mexican Miracle (El Milagro Mexicano).
This period was characterized by economic growth, social mobility, the formation of a basic
Mexican welfare state and further construction of a Mexican national identity. The head of state,
the president, was the primary political agent, controlling all important political actors –
parliament, governors, social organizations, the army and the judiciary – through the PRI. Thus
emerged a relatively mild and integrative form of authoritarianism (by Latin American standards),
which enjoyed broad social and popular support from the 1930s on.
The end of the 1960s showed not only the first signs of the exhaustion of the economic basis for
the miracle years, but also a growing discontent with the political regime. This was particularly
manifested by the student movement, which was violently suppressed in the 1968 – 1971 period.
In the 1970s, Mexico’s economic prosperity came to an end as the economic import substitution
model reached its limits. The decline in oil prices at the beginning of the 1980s, together with the
rise in interest rates, led to a financial collapse that culminated in the debt crisis of 1982. One of
Latin America’s biggest debtors to international banks, the Mexican government declared default
in 1982.
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The financial crisis, coupled with pressure from international financial institutions, led the Miguel
de la Madrid government (1982 – 1988) to initiate a liberalization of the Mexican economy. This
entailed the opening of the Mexican economy and the reduction or elimination of subsidies to
Mexican entrepreneurs, workers and peasants. Market liberalization was marked by a rapid and
meaningful reduction in trade restrictions and by the privatization of state companies, with the
significant exception of those involved in the production and sale of electric energy and oil. The
governments that followed, under Carlos Salinas de Gortari (1988 – 1994) and Ernesto Zedillo
(1994 – 2000) continued this liberal economic course. A significant step in this direction was the
signing of the North American Free Trade Agreement (NAFTA) and Mexico’s admission to the
OECD in 1994. The Zapatista uprising of 1994 was a symbol of the rejection of these policies by
those parts of the population that were not to see significant tangible benefits from the neoliberal
economic strategy.
The transition of the year 2000 occurred without rupture, as steadily increasing discontent with
the single-party PRI government fueled a surge in support for the opposition parties: the rightwing National Action Party (Partido Acción Nacional, PAN) and the left-wing Party of the
Democratic Revolution (Partido de la Revolución Democrática, PRD). PAN candidate Vicente
Fox won the 2000 presidential elections essentially on the basis of an anti-PRI vote. His victory
raised very high expectations of change, but Fox’s administration managed to disillusion almost
all social sectors. It failed to dismantle the old authoritarian institutions, and made little advance
in the construction of more democratic ones. He continued to apply the orthodox liberal economic
model, but the economy failed to grow substantially. The state’s assistance policies did not manage
to reduce poverty significantly, or to alleviate the country’s enormous income disparities.
This set the stage for polarization between those who had benefited from the new economic model
and those who had suffered from it; this divide led to the highly polarized electoral scenario of
2006. The PAN candidate, Felipe Calderón, won the 2006 elections on the basis of a very small
margin (0.56%) after a campaign marred by the intervention of incumbent President Vicente Fox
and the business sector. This prompted PRD candidate Andrés Manuel López Obrador to denounce
the elections as fraudulent, deny recognition to the new government, launch a movement of
resistance against the incoming government and declare himself to be the legitimate president.
This situation influenced Calderón’s decision to send the army into the streets in order to fight the
drug cartels. This resolution was taken in part as a political tactic to gain legitimacy and show the
opposition mobilized by López Obrador that the president had the support of the army; but it was
also seen as the new president’s genuine strategy in fighting the growing power of the drug cartels.
Since that time, the war against the drug cartels has become the main issue in the country, with
violence escalating to unprecedented levels.
With the election of Enrique Peña Nieto, in 2012 the PRI returned to power after 12 years in
opposition. After a first year of political success, however, political and economic developments
– above all the Tlatlaya and Ayotzinapa massacres, corruption scandals, and the plunging price of
oil – almost paralyzed the government’s reform policies.
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The BTI combines text analysis and numerical assessments. The score for each
question is provided below its respective title. The scale ranges from 1 (worst) to
10 (best).
Transformation Status
I. Political Transformation
1 | Stateness
Felipe Calderón’s “war on drugs” delivered the government of Peña Nieto a country
that had suffered more than 80,000 killings and nearly 30,000 disappearances. The
crime rate had doubled: though it had been declining and was around 9 deaths per
100,000 inhabitants, by the end of 2012 the rate had increased to 22 deaths per
100,000 inhabitants. The Peña Nieto administration gave the impression that the
strategy to fight the drug cartels had changed and that the situation was starting to
come under control.
Question
Score
Monopoly on the
use of force
5
Recent events in Michoacán, where “autodefensas” appeared to substitute the formal
police, and the events of Tlatlaya and Ayotzinapa have exposed the widespread
corruption and impunity that prevails in many regions and localities of Mexico. They
also have laid bare the infiltration of police forces by drug organizations, who also
have control of the local judicial system and economic hold over parts of the
population. This has shown the weakness of the state in some regions and that there
is a situation of ungovernability in certain regions of Mexico.
Patterns of state identity changed little during the period under review. Since the
Zapatista movement of the mid-1990s heightened popular consciousness about the
fact that some of the country’s indigenous peoples face discrimination, and are
economically, socially and politically marginalized, things have not changed
dramatically. This movement, with which many other indigenous movements
identified, defined the desire to preserve an independent identity in the face of a
majoritarian national Mexican (mestizo) culture. Contrary to identity movements in
Europe, however, they never posed an aggressive stance toward non-indigenous
peoples nor challenged the identity of the state. There was never a question of
territorial secession or even of any profound level of autonomy. In the wake of this
movement’s activity, the constitution was changed to define the Mexican nation as a
multicultural state. In addition, some local groups, especially in Oaxaca, have been
granted the possibility to exert political and civic rights under indigenous customary
State identity
8
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laws. In fact, none of these groups have demanded economic, social or political
autonomy, much less territorial independence. There is, nonetheless, a de facto
autonomy in a number of regions of Chiapas controlled by the Zapatista movement.
The church and state have been officially separated since the mid-19th century,
particularly following the Mexican Revolution of the second decade of the 20th
century. There has been no official religion, no religion taught in public schools. The
state has been strictly secular, to the extent that until the early 1990s, the Mexican
government did not have formal relations with and did not officially recognize any
church; when it had to negotiate with the church, it did so in relative secret. Though
this situation is unusual even among democratic countries, one cannot separate it from
the country’s history. The Catholic Church supported a war and the installation of a
foreign emperor in the 19th century as well as a bloody war against the revolutionary
government in the second decade of the 20th century.
No interference of
religious dogmas
9
In 1992, the Salinas government modified the constitution in order to give recognition
to the various religions that exist in Mexico. Following PAN’s assumption of the
presidency and rise to power in some of the more devoutly Catholic regions, the
Catholic Church has increasingly intervened in issues such as abortion and gay
marriage. As a result, states such as Guanajuato and Querétaro have restricted what
was already a very limited right to abortion. The only state to have passed general,
comparatively liberal laws on abortion and gay marriage is Mexico City. The Catholic
Church openly criticized these laws and the local government, and called on its
members to vote against the leftist PRD. Although this has in effect been an open and
to a certain respect illegal intervention by the church in public affairs, the Mexican
national government through the Ministry of the Interior did not react. Nonetheless,
with the return of the more secular PRI, the increasing involvement of the church in
political issues will likely be restrained.
The Mexican state has been able to extend its influence by way of social services
such as education and health since the 1940s, when it committed to intervene actively
in the country’s economic and social development. As a result, the education and
health systems were extended to most parts of the country, although the most isolated
regions, typically those home to the indigenous population, were often excluded. As
a result, although 85% of the population today has access to sanitation, 15% still lack
this basic service. In addition, more that 50% of the population is below the poverty
line.
Because the PRI that ruled the country for more than 70 years needed to control the
vast Mexican territory both as a hegemonic political strategy and as a means of
consolidating the nation-state, it made sure that administrative structures were
extended to most of the country. Although the state has abandoned its intervention in
the economy since the mid-eighties and the hold of the PRI has weakened
considerably, the Mexican state still provides most basic services throughout the
Basic
administration
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country, even if its services are deficient in many respects and used in a clientelistic
manner to get approval from the population (especially during elections).
With the last decade’s expansion of the Progresa (formerly Oportunidades) assistance
program and creation of the Seguro Popular, the mid-1980s to mid-1990s trend
toward a reduction in coverage has been partially reversed. With the return of the
PRI, a more corporatist/clientelistic party, efforts to extend administration through
social policies and investments will probably be expanded. Nevertheless, the
plunging price of oil over the last few months is putting a strain on government
finances that strongly depend on oil exports.
2 | Political Participation
Although there are independent institutions – the Instituto Federal Electoral, IFE,
since 2014 named Instituto Nacional Electoral (INE), and the Tribunal Electoral del
Poder Judicial de la Federación (TEPJF) – that organize elections, count votes and
have the capacity to penalize parties and declare elections invalid, their oversight is
limited to the official campaigns and elections. As such, what happens in between
campaigns and elections and outside of the polling booths is not controlled. For
example, access to the media is largely uncontrolled except when the parties are
campaigning. It is clear that the two principal television networks were promoting
President Peña Nieto (he had been governor of the State of Mexico) and that this
coverage contributed substantially to his election win. While some political actors are
never mentioned or are mentioned negatively for years, others are mentioned
continuously in a very positive light. Another fundamental anti-democratic factor,
again proven during the 2012 elections, is the persistence of clientelistic practices by
all parties: they publicize official public programs as their own as well as distribute
food, household appliances, construction material, money and other gifts in order to
gather people for their meetings or for elections.
Free and fair
elections
Since the “war on drugs” of the Calderón presidency, many candidates and elected
officials have been assassinated. This has made it increasingly difficult and dangerous
to exert individual political rights, such as running for office or campaigning. Drug
interests in some regions have effectively infiltrated politics. We have witnessed how
in some state and municipal governments elected officials have been involved in
crimes; the latest example being Iguala in Guerrero, but other cases have been
mentioned in Michoacán, Tamaulipas, Veracruz, Sinaloa, and Chihuahua.
Effective power to
govern
The Mexican state has been considered as “captured” even by the World Bank. The
state’s autonomy has been limited by the interests of the monopolies or semimonopolies that in Mexico control some sectors such as: telecommunications, the
media, banking and cement. The regulatory institutions charged with monitoring
them are weak or directly controlled by them. Certain corporatist (social)
7
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8
organizations wield strong veto power, such as the primary education and petroleum
workers’ unions. Although most trade unions have lost significant political strength
at the national level, they are still influential at the local level. The latest reforms of
the Peña Nieto government in telecommunications and education will probably have
the effect of increasing the state’s capacity to control.
Although the Mexican army has been under the control of the civilian government
since the 1920s, the fact that it has been called upon to perform internal security tasks
and is receiving large amounts of resources in the context of the fight against drug
trafficking does imply some change in the situation. The army has come to criticize
some of the measures taken by the civilian government. This situation may worsen
under the criticism and clear-cut accusations of human rights violations that the army
is enduring, as in the case of the Tlatlaya affair and accusations by parents of the 43
students abducted in Ayotzinapa that the army was in some manner involved.
There are no formal limits on social organization. Formally, ample rights of
association and assembly are in place. Nevertheless, there are informal and even
illegal means by which free association can be undermined, such as preventing
workers from organizing in independent unions or forcing them to organize under
specific unions, some of which are under the control of the employers (“phantom”
trade unions). Although this is most visible in the labor movement, other types of
organizations are also prevented from forming or operating. In the past, the PRI
served as an almost exclusive organizer of popular interests. Since it is the
government that gives organizations official recognition, there are many ways in
which local, state and even national governments can restrict unions, peasant
organizations or other groups from organizing. While this practice was instituted and
implemented by the PRI, other parties have adopted these practices as well. In
addition, such organizations have also been controlled through clientelism.
Association /
assembly rights
7
More grimly, social activists have been murdered in the maelstrom of violence that
exists in many regions of the country. As most crimes in Mexico go unpunished, no
one ever finds out who ordered the hit or killed them. Thus, in the midst of this
confusion, political enemies or local governments may command the assassination of
some of their opponents with relative impunity, something that has surely made
political, social and journalistic activity more risky.
Mexico’s mass media is basically free; de jure and mostly de facto, citizens and
journalists may speak and write freely. However, electronic media ownership is very
concentrated. On the national level, there are two main TV channels, while radio is
largely controlled by the same two companies along with a few other big radio
companies throughout the country. These two primary media enterprises are thus the
most influential and have the ability to mold public opinion. The two companies
obviously decide who works in their newsroom and control news content as well as
the opinions and editorials that are aired. There have been notable cases in which
Freedom of
expression
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9
commentators who did not hold strictly to the company line were fired. There are also
notable cases of “hidden” state publicity, as in the case of the present President Peña
Nieto.
There are many ways in which media can be influenced or pressured. Government
gives out radio and television frequencies, allocates publicity, controls the unions of
the workers of these companies, can invent or decide to sanction infringements on
tax, commercial or labor laws (as it has a strong control over the judiciary). All of
these are manners in which the government exerts pressures on the most influential
and critical media. As the PRI has always excelled in these measures, we should
expect harsher conditions for independent media in the near future. The recent ousting
of one of the most influential and serious critics of the Peña Nieto administration,
Carmen Aristegui, from a private radio station (most certainly due to pressures from
the government), does not bode well for freedom of expression; especially in a
situation where there are very few (if any other) critical journalists that have access
to as large an audience as she had.
It is also true that the public has become more demanding and that NGO’s are better
organized to protect them. In addition, the Internet and, more specifically, Twitter
have become important means of communication in Mexico, as in other parts of the
world. Internet access is, nonetheless, restricted to an urban, young and educated
segment of society; the majority of the population only has access to the two
television channels.
In the last years, many journalists have been assassinated, and there have been armed
attacks on radio and TV stations that report on the drug cartels. This is probably the
most serious threat to freedom of expression in Mexico. Mexico is one of the most
dangerous countries for journalists, along with Iraq, among other countries.
3 | Rule of Law
Since the PRI lost its majority in the Chamber of Deputies in 1997, there has been an
ever-clearer separation between the executive and Congress. This separation of
powers has been reinforced since the PAN won the presidency and resulted in a
continuous blocking of governmental initiatives during both Fox’s and Calderón’s
presidencies. From 2000 to 2012, there was also an increasing separation of powers
between the central (federal) government and the state governors. Nevertheless, the
states continued to depend on the federal government for resources as their capacity
to collect taxes is very low.
In part because of this mutual autonomy, the various branches and levels of
government have little effective capacity to check each other’s actions. There have
been cases in which certain governors were proven to be corrupt or inefficient, but
Separation of
powers
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10
the federal government was unable to dismiss them because the Senate, the only
institution allowed to dismiss an elected official, refused to do so. Congress has the
legal right to oversee the executive’s execution of the budget, but no capacity to
impose any sanction unless it can prove misconduct.
Congress has lost some of its autonomy to act for a number of reasons. First, the PRI
almost has a majority in Congress and can count on its ally, the Green Party, to
achieve it. In addition, the “Pacto por Mexico,” an alliance between the three main
parties, had enabled Congress to approve all the initiatives of the government
(sometimes with small modifications). Now that this alliance is over, the PAN
supports most of the initiatives of President Peña Nieto because it agrees with his
economic views. The PRD, which lost its critical capacity because it had been
weakened and its power contested on its left by the party of Lopez Obrador, has
decided to present itself as a more “responsible” party. The fact that the PRI holds
most of the governorships has also reduced the federal division of powers. Finally,
the abduction and assassination of students in Ayotzinapa has led the president to
present an initiative to centralize police forces at the state level.
Under the PRI regime, the judiciary was tightly controlled by the presidency. The
president was the only institution allowed to nominate senior judges, especially (but
not only) those of the Supreme Court. Only judges that belonged to the PRI were
eligible for nomination. This changed with the judicial reform of 1995, which created
the Judicature, a body that appoints judges and decides on their promotion. This
reform also increased the power of the Supreme Court, giving it the status of a
constitutional court. Its members are now appointed by the Senate, who chose from
among three nominees nominated by the president for each post. Since this reform,
the Supreme Court has ruled against the president on several occasions. Even so, we
have recently seen that the president is able to secure a Supreme Court appointment
for a person close to him. Though this nominee was strongly questioned, this
appointment is a sign of the decreased autonomy of Congress during the present
administration.
There is no independent judicial authority effectively able to check Congress, the
governors or the federal executive. The general prosecutor is still beholden to the
presidency, although a law was passed (that will come into effect shortly) by which
this position would become independent. The autonomy of the judiciary with respect
to pressure groups or criminal groups is another troublesome issue. Criminal groups
have taken advantage of widespread corruption among judges, a critical problem at
the local level. Strong economic interests have also proven able to manipulate judges
for their advantage. On the whole, the judiciary at the state level is significantly less
independent than its national counterpart.
Independent
judiciary
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The prosecution of office abuse is almost totally deficient in Mexico. Even so,
increased levels of political democratization and transparency have contributed to the
mass media’s autonomy and to an increasing number of civic organizations that
scrutinize politicians. This has resulted in a rise in the number of denunciations
against corrupt or inefficient politicians. Nonetheless, there has been little capacity to
prosecute offenders. There have been numerous cases of corruption and/or
inefficiency where there were no prosecutions or only lower-ranking functionaries
were prosecuted. The most significant examples are: a fire at a kindergarten that cost
the lives of 52 infants during Calderón’s presidency, the killing of 72 migrants in
Tamaulipas, the massacre in Tlatlaya, the problems of metro line 12 in Mexico City,
the corruption scandals involving the president’s wife and his finance minister, and
the many governors that have been proven to have heavy embezzled resources from
their governments. All, but Tlatlaya, have never seen a prosecution.
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Prosecution of
office abuse
4
There are no independent institutions with the power to impeach or prosecute
governors, the executive cabinet or the president himself. In summary, the public
today has more information about the manner in which functionaries behave and exert
power, but very limited capacity to hold offenders fully accountable for their actions.
Formally, civil rights are guaranteed in Mexico, but they are continuously being
violated by police, the army and even the judiciary. In these cases, citizens have little
or no ability to obtain compensation or defend themselves. This situation has
worsened dramatically in those places where the “war” against drugs is intense. In
most cases involving a violation of human rights, the police and army are involved;
something that is clear in the case of Ayotzinapa.
As a result, jails are filled with innocent people who lack sufficient resources to
defend themselves; trials can take years for the poor. People who are the victim of a
crime rarely report it to the police, either because they are afraid that the police may
be involved or because they feel it is useless, as 97% of crimes go unsolved or
unpunished. The police and army have been accused of terrible violations of rights
(e.g., rape, excessive use of violence, arbitrary detention, keeping the arrested person
incommunicado, shooting civilians after mistaking them for drug traffickers and
executing assumed criminals).
The federal and state Commissions of Human Rights are either totally controlled by
the governors or when they are independent, as is the case on the federal and Mexico
City levels, their recommendations are almost never complied with.
Mexico is a very “machista” society, where women are discriminated against and
mistreated. There is a very strong racism against indigenous persons and other
minorities, such as sexual minorities. Discrimination based on sexual orientation is
less pronounced in places such as Mexico City, where same-sex marriages are legal.
Civil rights
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4 | Stability of Democratic Institutions
Mexico’s political institutions are relatively stable with respect to the periodicity of
elections, their organization election day, the counting of votes and the decision by
the electoral commission regarding who has won. Nonetheless, the last two
presidential elections (particularly the 2006 election) have been considered
fraudulent by the left-wing candidate. The IFE (now the Instituto Nacional Electoral,
INE) regulates the formal campaign, but has no jurisdiction to control what happens
between campaigns or elections. Nor can it prevent government functionaries
(especially at the local level) from backing their own candidates with public resources
(including social programs). INE is also powerless to prevent inequitable promotion
of some candidates by media.
Performance of
democratic
institutions
6
The general public has a very poor impression of the political parties. There is a
widespread feeling that the political system is a “partitocracy” and that the dominant
political parties and other political institutions are not addressing the country’s most
important issues. Initiatives proposed by the executive or promoted by a group of
legislators take a long time to be discussed and passed; the resulting impression is
that Congress is ineffective. This perception changed during the first year of Peña
Nieto’s presidency with the “Pact for Mexico,” though then the impression was that
the president’s initiatives were passed without debate and without a functioning
opposition.
Certain structural characteristics of Congress are ineffective. The ban on reelection,
which existed until the most recent political reforms (which allow for reelections
within some posts), has meant that most legislators have little experience, adding to
the body’s low efficacy.
At the local level, democracy is even less complete. The governors have had control
over the local institutions that organize elections (though the recent political reforms
have given the federal INE control over elections at all levels). They control the local
congresses and judicial offices, thus invalidating most elements of a division of
power. There is also much less accountability at this level.
The main political and social actors are formally committed to the country’s
democratic institutions. To date, the army has remained under civilian control, though
it is on the front lines of the “war on drugs” and has begun expressing criticism of
political actors and Mexico’s current state of affairs. The political parties are
committed to democracy and there is no anti-systemic party, though the parties do
continue to function in a clientelistic manner. Although the majority of Mexico’s
population still supports democracy, inefficacies in both the executive and legislature
have affected the public’s views of the political parties, a trend that risks affecting
the prevailing opinion on democracy itself. The public’s opinion of the parties has
Commitment to
democratic
institutions
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13
been gravely damaged by recent events in which politicians were involved with drug
cartels and, especially, with the killing of the Ayotzinapa students. In fact, the parents
of the massacred students and the groups which support them, such as the teachers’
union of the state of Guerrero, have called for next year’s local elections to be
cancelled.
It is clear that one of the biggest threats to democracy in Mexico comes from outside
the system, from the infiltration of drug gangs into politics and the violence that deters
participation.
5 | Political and Social Integration
The party system in Mexico is quite stable. Three large parties receive most of the
votes. Voter volatility is moderate. In the 2003 elections, the PRI received 30.6% of
the parliamentary votes, followed by 29% in 2006 (in coalition with another party),
44% in 2009 (again in a coalition) and 38% in 2012. The PAN received 33.4% in
2003, 23.1% in 2006, 28% in 2009 and 25% in 2012. The PRD received 17.6% in
2003, 29.0% in 2006 (in a coalition), 18% in 2009 and 32% in 2012. The spikes in
votes received by the PRD in 2006 and 2012 were the presidential elections where
the party ran the charismatic candidate López Obrador.
The political configuration may change in the next election. The PAN is in crisis as
it lost the presidency and fell to third place in 2012. The PRD, however, are in a much
worse state. Its popular presidential candidate López Obrador, who had given the
party much impulse in the presidential elections, left the party to launch his own,
called Morena. In addition, Cárdenas, the founder of the party and its moral guide,
also left the party. This will surely split the votes on the left between the two parties
and may eventually annihilate the PRD.
The three parties control most of the seats in the Chamber of Deputies as well as in
the Senate. Thus, the problem in Mexico is not, as in other Latin American countries,
the extreme volatility of the party system, but rather the fact that it increasingly
resembles a partitocracy. This was reinforced by the electoral reforms of 2007 and
2012, which strengthened the main parties over smaller ones, and increased the total
resources available to parties (by limiting the amount of money they could spend on
political advertising in the media).
The party system’s stability does not come from having deep roots in society; in fact,
it is quite detached and rooted primarily in very weakly representative organizations.
Instead, the party system is basically controlled through clientelistic means.
Party system
7
BTI 2016 | Mexico
In the past, the PRI-led regime managed to concentrate most social interests within
the party itself, thus assuring the stability of the regime. Under this schema, the main
interest groups were trade unions, peasant organizations and other popular-sector
organizations. All were highly organized, and their leaders negotiated within the PRI
for advantages for their membership and for political posts for themselves. Although
business interests were not directly included in the PRI, they were also organized and
their opinions usually taken into consideration when decisions affecting them were
made. During the 1980s and 1990s, these various organizations lost power and
importance due to the retreat of the state from the economy, the deregulation of the
labor market, the end of the agrarian reform and the democratization process. The
PRI hollowed itself out, and the organizations that had served as its foundations
became decreasingly representative; this process weakened the PRI itself and led to
the gradual transformation of the political regime.
14
Interest groups
7
This old PRI system has been replaced by an interest group configuration in which
the big economic actors have, in many ways, “captured” the state. Among these figure
most notably the two television companies that helped campaign for Peña Nieto,
especially Televisa. The present Attorney General is the sister of one of the highest
executives at Televisa. The ally of the PRI, the green party, is linked to this same
enterprise.
President Peña Nieto and his finance minister both received houses from an important
contractor to the federal and (some) state governments, most notably the State of
Mexico, where Peña Nieto was governor. Today, it is the large economic oligopolies,
along with foreign investors, that are capable of pressuring the government to
implement economic policies that favor them. With the reforms it undertook during
its first year back in government, the PRI seemed to try to assert the autonomy of the
state, but these reforms do not seem to have gone far enough to considerably increase
its autonomy.
Until the presidential elections in 2006, one could have said that the commitment to
democracy was rapidly gaining ground in Mexico. However, the main opposition
candidate never accepted the results, and managed to convince around 30% of the
electorate of the justice of this position. In the 2012 election, with the same candidate,
the elections were not as polarized. Nonetheless, there were many irregularities,
which explains why, according to Latinobarómetro, Mexican respondents’ support
for democracy declined to a historical low in 2013 (now 12 percentage points below
the average between 1995 and 2013). In 2000, the level of approval was 44%, in
2002, after the PRI was ousted from the presidency, it reached its maximum of 63%
and continued high in 2005 at 59%. Calderón’s presidency began in 2006 with
support for democracy at 54% and went on to reach a minimum of 40% in 2011. With
the return of the PRI, it reached a further low of 37%. Mexico has one of the region’s
lowest percentages of respondents approving of democracy. In addition, confidence
in the government (Latinobarometro 2011) is also very low, 31%; the average for the
Approval of
democracy
5
BTI 2016 | Mexico
15
continent is 40%. Finally, and most worrisome, when asked if they would never
accept a military government, respondents in Mexico were among the lowest in Latin
America, 53% (where the regional average is 66%); Mexico is at the bottom with
Paraguay and Guatemala.
In terms of interpersonal confidence, the 2011 Latinobarometro reports that Mexico,
with 23%, is on average with Latin America as a whole (22%). The perception that
citizens comply with the law is very low (19%), the average for Latin America is
31%. The perception that citizens are conscious of their obligations (28%) is also
below the Latin American average (38%). The summary of civic culture according to
Latinobarometro situates Mexico, together with Peru, at the bottom of all the
countries on the continent. Participation in political and social organizations is also
weak in Mexico is also weak, though recent data are not yet available. Interest in
politics is average in Mexico (30%), the Latin American average is 28%.
Participation in social organizations and the number of NGO’s is very low in Mexico,
compared with what can be seen in Brazil, Argentina, and smaller countries such as
the Dominican Republic and Bolivia. Mexico still has the old corporatist
organizations that structured the PRI, which, though they still exist and formally
organize the population (workers, peasants, popular sectors), have been “hollowed
out” by liberal economic measures and are at present totally unrepresentative.
Social capital
5
II. Economic Transformation
6 | Level of Socioeconomic Development
In the 2010 Human Development Index (HDI), Mexico was ranked ahead of Brazil,
but behind Chile, Argentina, Uruguay and Costa Rica. In the 2014 HDI, Mexico’s
position in relation to these regional neighbors has not changed. However, if one
compares Mexico to Turkey, it has lagged behind. While Turkey went from ranking
82nd to 69th, Mexico receded 2 places since 2005. Compared to other Latin American
countries, Mexico has a relatively low percentage of people living on less than $2 a
day (i.e., living in extreme poverty), but the percentage is still higher than in
Argentina, Chile, Uruguay and Costa Rica. Government assistance programs active
since the nineties have reduced the extreme poverty rate from 8% to 4.2%. Even so,
much must still be done to address poverty and inequality. According to CONEVAL
(Mexico’s National Council for the Evaluation of Social Development Policy),
though the percentage of the population living in poverty was reduced from 46.1% to
45.5% between 2010 and 2012, the absolute number of poor has actually increased
due to population growth, from 52.8 million to 53.3 million. In addition, the country’s
Gini index is one of the highest in the world, though it decreased from 51.6 in 2008
Question
Score
Socioeconomic
barriers
6
BTI 2016 | Mexico
16
to 48.1 in 2012. Other countries in Latin America that were worse off than Mexico
have reduced poverty and inequality faster (some, nonetheless, remain more unequal,
such as Brazil). The resilience of poverty and inequality in Mexico, after 30 years of
increasing exports and expanding assistance policies, forces us to conclude that
poverty and inequality are structurally entrenched, and that an economic model based
solely on exports appears incapable of solving the country’s poverty and inequality
problems.
Gender inequality is high when compared to developed countries but also when
compared to some Latin American countries such as Uruguay, Costa Rica and Chile.
In contrast to poverty and inequality, however, this type of inequality has been
reduced, from 0.429 to 0.376. Nonetheless, the percentage of women in the labor
force is one of the lowest in Latin America, 38.5%. This may have to do with the role
of women in the traditional family structure.
Economic indicators
2005
2010
866346.5
1051128.6
2013
2014
GDP
$M
1262248.8 1282720.0
GDP growth
%
3.0
5.1
1.4
2.1
Inflation (CPI)
%
4.0
4.2
3.8
4.0
Unemployment
%
3.5
5.2
4.9
-
Foreign direct investment
% of GDP
2.9
2.5
3.5
1.8
Export growth
%
5.7
20.5
2.2
7.3
Import growth
%
7.7
20.5
2.5
5.7
Current account balance
$M
-8955.9
-5022.7
-30445.6
-26452.8
Public debt
% of GDP
39.0
42.2
46.4
49.8
External debt
$M
175917.8
262022.5
443012.5
-
Total debt service
$M
36458.6
33640.3
42398.1
-
BTI 2016 | Mexico
17
Economic indicators
2005
2010
2013
2014
Cash surplus or deficit
% of GDP
-
-
-
-
Tax revenue
% of GDP
-
-
-
-
Government consumption
% of GDP
10.7
11.7
12.2
12.3
Public expnd. on education
% of GDP
4.9
5.2
-
-
Public expnd. on health
% of GDP
2.6
3.1
3.2
-
R&D expenditure
% of GDP
0.40
0.46
-
-
Military expenditure
% of GDP
0.4
0.6
0.6
0.7
Sources (as of October 2015): The World Bank, World Development Indicators 2015 | International
Monetary Fund (IMF), World Economic Outlook, October 2015 | Stockholm International Peace
Research Institute (SIPRI), Military Expenditure Database 2015.
7 | Organization of the Market and Competition
Market competition has been solidly established in Mexico since the government
opened the economy, privatized state enterprises and deregulated the economy in the
1980s. The signing of NAFTA in 1994 helped reinforce Mexico’s open economy and
market orientation. The reforms of the Peña Nieto government went still further in
the direction of an open economy: opening the energy sector to private capital and
introducing reforms that will make the telecommunications sector more competitive.
The government does not control prices nor the entry or exit of foreign currency, both
are defined by the market. Nonetheless, there are still oligopolies in many sectors,
including telecommunications, cement, electronic media and retail sales (e.g.,
Walmart), that inhibit competition and increase the prices of products for small and
medium-sized companies. Substantial market concentration around one or a few
companies also exists in other sectors, such as tortilla production (Maseca) and the
distribution of medicines. One other factor that limits competition is that between
40% and 50% of the economy is informal. These informal actors do not pay taxes
and thus compete unjustly with the formal sector.
Small and medium-sized companies in Mexico encounter many administrative
difficulties in opening and functioning because of administrative procedures,
corruption and, increasingly, violence. In addition, these kinds of enterprises have no
access to financial support as the government does not lend directly to enterprises and
the private banks, which are in the hands of foreign investors, do not lend to
enterprises, but rather to consumers.
Market-based
competition
6
BTI 2016 | Mexico
18
The Peña Nieto administration ended the state’s monopoly in the energy sector and
reformed the telecommunications sector to allow for more competition. Nonetheless,
the regulatory agencies have not been sufficiently reinforced. Although the Federal
Competition Commission is tasked with regulating monopolies and trusts, this
agency has little power compared to its counterparts in other countries, such as the
United States. Regulatory actions take too long and the sanctions are too weak to be
dissuasive. As a result, the agencies are generally unable to induce behavior changes
in the very large companies they are supposed to regulate. Moreover, the regulatory
agencies do not have the capacity to force monopolies to split apart, transform or sell
divisions. The latter was, however, imposed by the new telecommunications law,
which is forcing the main telephone company, Telmex, to sell part of its business.
Nonetheless, according to the new law, the company will still be able to preserve 50%
market share. In addition to the federal office, individual bureaus oversee specific
sectors such as telecommunications or banking. However, various studies, most
notably one by the World Bank, have found that these bodies are ineffective as they
are controlled by the enterprises they are supposed to regulate, something that has not
changed radically.
Anti-monopoly
policy
Mexico is rightly considered to be one of the most open economies in the world. The
country began opening its economy with its accession to the General Agreement on
Tariffs and Trade (GATT) in 1986. It subsequently signed the NAFTA with the
United States and Canada, further liberalizing foreign trade. The country also has
trade agreements with more than 48 countries around the world (including the
European Union, Chile and Japan). Most trade is done without tariffs; in 2008, the
last few restrictions on trade were eliminated when the import of maize and beans
was liberalized. There are no restrictions on capital inflows or exit, in fact, NAFTA
rules prohibit any such restrictions.
Liberalization of
foreign trade
6
10
Since a few years after it entered GATT in 1987, Mexico has not had non-tariff import
and export barriers. It strongly criticized the decision of Brazil to impose limits on its
car imports to this country a few years ago. Nonetheless, it has imposed some higher
tariffs on certain products being imported from China, such as toys and textiles, but
always in accordance with the rules of the WTO.
After the 1994 financial crisis that led to the collapse of the Mexican banking system,
banks changed hands and were mainly bought by foreign institutions. Today, the
main banks are owned by Spanish (BBVA-Bancomer and Santander-Serfin), U.S.
(Citibank-Banamex), Canadian (Scotia-Bank) or English corporate parents. These
banks represent nearly 90% of the private banking system. There is only one
significant Mexican-owned bank (Banorte), which merged with IXE to become the
third-largest bank in Mexico; at present, it controls around 14% of the market. The
fact that the banks are mainly controlled by foreign capital led to a more significant
devaluation of the Mexican peso during the global financial crisis than was seen by
Banking system
8
BTI 2016 | Mexico
19
other Latin American currencies, as foreign companies and foreign-owned banks
repatriated capital in order to boost the liquidity of their parent banks back home.
Most Mexican banks do not lend to enterprises, as the requisites for lending to
Mexican small and medium-sized enterprises are so strict and interest rates so high
that the companies cannot afford them. Large companies, which have access to the
foreign capital market, get loans with much lower interest rates from foreign banks.
The Mexican banks concentrate on lending to consumers through credit card, home
and automobile loans. They charge very high interests rates and commissions to
individuals, which makes banking a good business in Mexico. Government officials
have sporadically accused banks of charging too much, but the National Banking and
Securities Commission has proven incapable of changing the situation.
Notwithstanding this general picture, the Mexican banking system seems to be quite
stable. As mentioned above, most banks are foreign and thus follow international
standards. The Mexican central bank is one of the most efficient economic
institutions, although one could criticize its exclusive interest on inflation and little
interest on growth. Mexico’s regulations today generally conform to international
standards and are often even more demanding in terms of risk management, internal
controls and capital adequacy. Stability can also be measured by the low level of nonperforming loans: 2.9% in 2014.
8 | Currency and Price Stability
Inflation has been kept under control for the last decade, with annual rates of between
3.5% and 5.3%. In 2013, inflation was 3.8% and in 2014 it was 4.5%, comparing
favorably with other developing countries. The Mexican central bank gained
independence at the beginning of the 1990s and controlling inflation has been its main
goal. Unlike the Federal Reserve Bank of the United States, it does not have job
creation as one of its goals. For its part, the government has been very careful not to
overspend, keeping a very tight control on deficits. A federal law prohibits the
government from deficit spending. For most of the last decade, it has even showed a
positive fiscal balance. Even in the crisis of 2008 and 2009, the government’s
budgetary deficit did not increase. This inaction in the face of the crisis was
considered folly by some structural economists, who demanded that the government
intervene in order to protect and create jobs, as the governments in other countries
(such as Brazil, Argentina and even very liberal Chile) had. In fact, the public
spending law and the actions of the Bank of Mexico result in pro-cyclical activity.
When the economy is growing, it spends more and when the economy is shrinking,
government spending decreases accordingly – a pattern that has been strongly
criticized by many economists in Mexico.
Anti-inflation /
forex policy
10
BTI 2016 | Mexico
20
Although World Bank data does not show the Mexican peso to be overvalued –
figures have hinted at depreciation since the second half of 2014 due to the
plummeting of global oil prices – Mexican economists argue that the peso has been
overvalued because of the input of foreign capital. This has hurt Mexican industry as
it increases the tendency to import.
During the global financial crisis, the government was very careful not to increase its
deficit and its debt. Nevertheless, the latter is among the highest in the developing
world. It did not use much of its reserves; indeed, reserve levels even increased over
the period. However, macroeconomic equilibrium was maintained even though
Mexico was one of the countries that suffered the most from the crisis, seeing GDP
fall by 4.9%. Large segments of the economy suffered an increase in unemployment.
Mexico has a structural commercial deficit that is not balanced by the entry of
remittances and tourism; it has had continuous current account deficits over the last
ten years. It thus needs capital flows (both FDI and portfolio) to balance this deficit.
As such, Mexico depends heavily on these unstable resources to prevent a current
account crisis. Evidently, the inflow of capital has been insufficient and the country
has had to increase its debt. While Mexico has one of the highest debt levels in the
developing world, the share of GDP this debt represents is very low compared to, for
example, the European countries that are currently in a debt crisis. Nevertheless, the
speed in which the debt and the debt service have increased in the last six years is
something to follow closely as they may become real problems in the near future.
This situation may become more worrisome if the price of oil continues falling as it
has done these last 6 months. This is because although government consumption is
rather low compared to other countries (11%), around 40% of government resources
come from oil exports; the government collects a very small amount from taxes,
around 10% of GDP. If production and prices continue falling, the government will
have to increase its debt. Reserves are high, but nothing compared to those of China
or Brazil. Current reserves amount to double what the country pays in debt service,
which is not very large; the country’s reserves stand at $175,000 million, while the
debt service is $70,000 million and has been growing faster than the reserves.
Macrostability
7
BTI 2016 | Mexico
21
9 | Private Property
Property rights are, in general, well defined for multinational companies as well as
for large and medium-sized Mexican companies. No serious political force proposes
any form of nationalization. Nonetheless, entrepreneurs often complain of
bureaucratic obstacles to open and register a company, something that encourages
corruption. In fact, it takes longer in Mexico to register a company than in most other
Latin American countries: 64 days.
Property rights
6
The situation of small businesses is different. There are significant problems in
defining the property of individuals and small businesses at the micro level, linked to
the inefficiency and corruption of the administrative and the judicial system. Many
very small and micro businesses function informally, do not register, do not pay taxes,
do not register their workers and are thus vulnerable to functionaries of all sorts (e.g.,
trade unions, tax collectors and police) – a situation that induces corruption.
A more recent evolution which is becoming a serious problem in some northern cities
and regions, but also in states like Guerrero, Michoacán, Veracruz and Tamaulipas,
are criminal organizations demanding a ransom in exchange for protection. These
criminal organizations are stopping trucks and stealing merchandise as well as
hijacking workers, technicians in mines, agricultural concerns and oil fields. More
generally, property rights are being threatened by insecurity and violence that has
increased so dramatically over the last years.
In Mexico, private enterprise is largely given a free hand; there are few regulations
limiting or guiding sectoral investments. Privatization was almost totally completed
in the 1990s. The last sectors that remained in the hands of the state, oil and
electricity, have since last year been allowed access to private capital. Although it
takes little time to start a business, 6 days, it takes much longer to register it and
comply with all of the regulations. That is the reason why many small businesses
function informally. In addition, the presence of private oligopolies and monopolies
inhibit investments in certain sectors, including telecommunications, cement, radio
and TV, tortilla production, and consumer and pharmaceutical products distribution.
It is also true that the informal sector constitutes an unfair competition to established
enterprises that do pay taxes, somewhat better salaries and give social security
benefits to their workers. Many formal enterprises are pushed toward informality due
to this unfair competition.
Private enterprise
8
BTI 2016 | Mexico
22
10 | Welfare Regime
The pension system in Mexico has never covered more than 30% of the population,
as it includes only workers in the formal sector of the economy. The aging of the
population and the relative stagnation of the formal sector over time imposed heavy
burdens on the formerly pay-as-you-go system. This led the government to reform
the private-sector pension program (the IMSS) in 1995 and the public-sector program
in 2007, transforming the whole into a system based on individual capitalization. This
system will surely face even more serious problems than that after which it was
modeled in Chile, given that Mexico’s economy has not grown as steadily and many
workers do not contribute enough during their active working life.
The public health care insurance system has never covered more than 50% of the
population, even at its peak in the 1970s. The remainder of the population was
covered by the noncontributory public system operated by the Ministry of Health,
itself a very deficient system. Since 1995, health services have been decentralized to
the state level. In 2005, the government launched the Seguro Popular, which was
designed to formally incorporate all of the population not covered by the formal
health services sector. This program includes (a) at no charge, all those Mexicans that
received assistance from the government and (b) all remaining Mexicans who are
neither included in assistance programs nor covered by the formal health services
sector; for the latter, the Seguro Popular is voluntary and fees incurred are based on
income. It does not cover all illnesses, but rather a list of some of the most important
illnesses affecting the Mexican population (it excludes some important illnesses).
According to official data, more than 40 million people are at present in the program.
Nevertheless, the health institutions that are supposed to incorporate these people
have not received resources commensurate to their new obligations nor has the
already deficient public health system been substantially expanded. Health
expenditure in Mexico is very low compared to other countries at similar or lower
level of development – a mere 3.2% of GDP.
The most important social program is the Progresa (renamed in the Peña Nieto
administration) conditional cash transfer program. This anti-poverty program has
existed since 1988, under various names. Today, around 6 million families benefit
from it, although the budget is quite low: equivalent to 1.3% of GDP. It has
contributed to reducing extreme poverty, although it has been criticized for its
inability to reach the “working poor.” It has also been accused of being used
politically for clientelistic purposes in some states.
There is practically no effective unemployment insurance; even where such programs
have been implemented, such as in Mexico City (which is governed by the leftist
PRD), they cover a very minor percentage of the unemployed. In addition, the
government of Mexico City allocates around $50 a month to people over 70 years of
age. All this means that the family is still a fundamental, if informal, source of social
security.
Social safety nets
6
BTI 2016 | Mexico
Mexico has not achieved equal opportunity for all. The indigenous population,
around 6% of the total population (around 7 million people), is still totally
marginalized. While the country’s overall literacy rate is 94%, within the indigenous
population this figure is only 67%; a full 26% of the indigenous population has no
schooling, and 27% have only attended a few years of primary school. A common
explanation of this situation is that indigenous populations live in such remote areas
and in such small communities that reaching them is too costly. This is also the reason
given by government officials as to why health coverage is deficient for this
population.
23
Equal opportunity
5
Women have almost the same literacy and school attendance rates at all levels as
men. Thus, in this respect, at least, they seem to have access to equal opportunities.
The Progresa program has been instrumental in this respect, as it has provided
scholarships for women in the poorest homes, mainly in the countryside, in order to
facilitate their continuing education. This has seemingly worked well as female/male
enrollment at the primary level is 100% and at the secondary level is 108%. At the
tertiary level, where Progresa has no influence, the ratio becomes slightly negative
toward women, 95%.
Nevertheless, within the job market, most studies show that women on average earn
lower salaries than men. Within OECD countries, Mexico occupies the second-tolast place with respect to women’s employment rates: 38.5 % of women are employed
(Turkey is last with 25%). This is considerably below the OECD average of around
58%. Domestic abuse is a widely acknowledged problem; Mexican women are often
mistreated by their spouses or by male members of their family. Finally, there is the
tragedy of the thousands of unresolved crimes of violence against women in many
regions, especially, but not exclusively, in Ciudad Juárez and the State of Mexico.
11 | Economic Performance
Mexico was badly hit by the global economic crisis in 2009, when its GDP decreased
by 4.7% – one of the strongest recessions in the world. The next three years GDP
grew considerably, 5.1% in 2010 and 4% in both 2011 and 2012. In 2013 GDP grew
a mere 1.4% and in 2014 2.1%. These numbers are characteristic of Mexican growth
since the 1990s, where acceptable growth levels are followed either by crisis or by
very slow growth. The country has been unable to grow steadily since the 1980s. This
is due to continued population growth, which has resulted in low growth per capita,
and the incapacity of the Mexican economy to produce sufficient jobs for all those
entering the labor market. As a result, the informal market and criminal activities
have grown.
Since Mexico signed the NAFTA treaty, we have seen a synchronization of Mexican
economic growth with that of the United States. When the latter grows moderately
Output strength
6
BTI 2016 | Mexico
24
(around 2% per year), so does Mexico. This synchronization is a drawback for
Mexico as it needs a higher growth rate to catch up and because more people are
entering the labor market each year than in the United States. Worse still, Mexico
usually exhibits lower growth rates than the United States and is more deeply affected
by crises.
Mexican growth is basically driven by exports, but there is a weak connection
between the export economy, as many export industries have to import most of their
equipment (especially in the large “maquiladora” industry), and the domestic
economy. Export growth has been exceptional, but the Mexican economy is highly
dependent on imports and domestically adds very little added value, thus its impact
on the internal economic structure is very weak. This explains why, compared to
high-growth countries such as India and China, gross capital formation is low in
Mexico (at around 23% of GDP), while in India and China it is respectively over 30%
and 40%.
While macroeconomic performance appears good thanks to the low levels of
inflation, the country has a structural current account deficit, which has totaled more
than $10 billion per year in the last years. This deficit must be balanced by FDI and
portfolio investments, both of which are very unstable. We have seen growth of the
country’s total external debt, which will probably increase over the next few years as
the price of oil continues to decline and the Mexican government depends on oil for
40% of its income.
12 | Sustainability
Not much has changed in the last two years in Mexico regarding environmental
policy, which is clearly not a priority in the Peña Nieto government. None of the
important reforms undertaken by his administration in the year and a half of the “Pact
for Mexico” dealt with the subject, the government’s main focus being economic
growth. In fact, the government’s main reform, of the energy sector, allows for
fracking, which is highly contaminating. None of the major infrastructure projects of
the present administration, such as the high-speed train to Queretaro and the new
airport in Mexico City, have undergone an environmental impact assessment.
It is nonetheless true that over the last decades consciousness of environmental
problems has been growing on the part of the government, within civil society and
among the general population, although tangible solutions are not in sight. There are
an increasing number of environmental NGOs that exert pressure on governments,
both at the federal and local level.
The current government of Mexico City, in the hands of the leftist PRD, has not
substantially expanded the public transportation network. Instead, it continues to
Environmental
policy
5
BTI 2016 | Mexico
25
favor the use of individual cars. Although new cars have, on average, become cleaner,
there has been an immense expansion of automobiles in most Mexican cities, making
it impossible to effectively fight against pollution.
Nationally, river and water use has not improved. Most rivers and water sources are
contaminated, and water is used in a very inefficient manner both for human
consumption and irrigation (around 40% is wasted). In addition, water is hardly ever
treated or recycled by the companies or city administrations. Deforestation is a
serious problem in large parts of the country.
Companies that pollute are rarely sanctioned. Those that are sanctioned because the
problem they created is so huge typically pay a ludicrously small amount in fines.
One example was a mine in Sonora, run by the country’s largest mining company
Minera Mexico, which contaminated a very large extension of a river and tried to
conceal the damage. As a result, people in the area suffered physical damage and a
number of cattle died. Yet, the company was let off with a $3 million fine, even
though the damage will take years to be remedied and the costs are much higher
(possibly incalculable).
As a share of GDP (5.2%), Mexico’s public expenditure on education is equivalent
to that of other developing countries such as Brazil, China and India. Nevertheless,
this investment has shown very poor results in the past. In evaluations such as the
Program for International Student Assessment (PISA), Mexico shows very poor
results, indicating that resources are not well used. Neither resources nor salaries
seem to be the core problem, as teachers’ salaries in Mexico are not strikingly
different from those in other countries at a similar level of development. Education
problems seem instead to have political roots. The primary school system is captured
by the teachers’ union, the largest union in Mexico and a remnant of the previous
political regime, to which all Mexican governments have been complicit. Educating
students was a secondary goal of the education system for the PRI (and PAN)
governments and the teachers’ union. Instead, the union was a fundamental
instrument for electoral control during the PRI regime and an essential electoral ally
under the PAN.
The government of Peña Nieto passed a reform that focuses on the selection of
teachers being hired and on the need for teachers to pass regular competency exams.
These exams are designed to oblige teachers to retrain; if they fail an exam three
times, they lose their post. In some of the poorer states, where teaching is one of the
sole formal occupations, there is strong opposition to this reform from some teachers’
organizations. In some of these states, governors have agreed that the reform will not
be applied. It is also not clear who will train the teachers, how they will be trained
and with what real results.
Education policy /
R&D
5
BTI 2016 | Mexico
Spending only 0.43% of GDP on R&D, Mexico definitely lags behind countries such
as Brazil and China, which respectively spend 1.2% and 2% of GDP. This is the
lowest level of R&D investment among the OECD countries, below Turkey, Poland
and Slovakia, and is lower than many other countries of similar or even lower levels
of development.
26
BTI 2016 | Mexico
27
Transformation Management
I. Level of Difficulty
Mexico has a privileged position, neighboring the United States, the world’s largest
market. This proximity, however, may also be considered a disadvantage. Mexican
governments require a strong political will to preserve the country’s autonomy from
the United States. Most recent governments have not shown such will, particularly
since NAFTA subordinated the Mexican economy to that of the United States.
Poverty, lack of education and inequality have been, and continue to be, the most
serious structural constraints on Mexico’s growth and investment. Add to this the
violence and ungovernability seen in many regions, such as parts of Michoacán,
Guerrero, Tamaulipas, Veracruz, Chihuahua, where local police and politicians have
been infiltrated by organized crime.
Although extreme poverty has been reduced to between 8% and 14% through
government assistance programs, around 45.5% of the population is still considered
poor by CONEVAL. Inequality is another crucial challenge in Mexico. The country
is one of the most unequal countries in the world. These two issues are the primary
constraints on the domestic market, pushing activity into an informal economy based
on low-priced imports, either legal or illegal.
Other structural constraints include the lack of infrastructure, especially in the south
of the country where the poorest sectors of the population live. The labor force’s
average educational level and competitiveness are quite high, although at the middle
level of engineering and administration functions, there is a lack of highly skilled
personnel. Along with the lack of investment in R&D and the absence of a close
working relationship between industry, research centers and universities, this helps
explain the lack of new technological developments and the low number of registered
patents.
Finally, Mexico is vulnerable to natural disasters. In 1985, an earthquake hit Mexico
City, destroying thousands of buildings and killing thousands. Beyond earthquakes,
Mexico is also vulnerable to hurricanes. These have become more and more
destructive due to global warming and hit vital tourist sites such as Cancun,
Acapulco, Veracruz, upon which local economies depend.
Structural
constraints
6
BTI 2016 | Mexico
The former regime was based on state control of social organizations through its
political party, the PRI. From the 1980s on, the number of autonomous organizations
has consistently grown. First, after the earthquake of 1985, it was the inhabitants of
downtown Mexico City that organized, followed by organizations that pushed for
more transparency in the electoral process. In the 1990s and 2000s, many NGOs,
including ecological and minority groups, emerged. Since 2000, driven by the
increasing levels of violence and insecurity, groups of citizens have organized to
demand that the government resolve the ongoing violence, kidnappings and other
serious crimes. However, these groups act in an atomized fashion and have little
influence on political society at large. Compared to countries such as Brazil, the
density of civil society in Mexico is quite low.
28
Civil society
traditions
6
The situation for civil society and the press has worsened in the last years because of
violence exerted against social activists and journalists. In the confusion created by
violence and the impunity that has characterized it, social activists and journalists
have been killed without the public knowing if its motives were political or merely
criminal. Analysts have the impression (though no proof) that many murders of social
activists and journalists were ordered by local governments or politicians in very
violent regions.
Most traditional organizations are still led by old-guard figures, and even those
groups that have seen a change of leadership have maintained an authoritarian
organizational culture. Clientelism is deeply imbedded in the political culture of
citizens and organizations. Many Mexicans are formal members of organizations
(e.g., unions and peasant associations), that date from the PRI regime, in which they
do not actually participate.
Mexico’s present crisis of violence is unrelated to political cleavages; the intensity
of conflict in Mexico comes from the activity of criminal gangs. Since mid-2014,
communities in some of the regions more affected by this violence have organized
popular defense groups to fight against the criminal gangs. The government intended
to legalize and control these groups, but some of them have been infiltrated by
criminal gangs and others have started fighting each other for control. Clashes
between different organized gangs and between these gangs and the police or army
occur almost every day.
The disappearance of the 43 students in Ayotzinapa led the families of these students,
other students and teachers to radicalize, both in Guerrero and in Oaxaca. The
situation in Guerrero is practically insurrectional. The groups demanding the return
of the abducted students have blocked roads and torched government buildings,
gravely damaging the local economy. Although this situation has not gone so far as
to strengthen the guerrilla movement that exists in these regions, the situation is very
tense in three of the poorest states in Mexico.
Conflict intensity
7
BTI 2016 | Mexico
29
The events of Ayotzinapa stimulated three massive protests in Mexico City, where
thousands of people demanded the students’ return. Many also demanded that the
president step down. Six months later, the activities of civil society in Mexico City
have receded, although it could reignite if another such event occurs.
II. Management Performance
14 | Steering Capability
While the two preceding PAN governments were blocked by the PRI opposition, who
used this strategy to return to the presidency, the government of Peña Nieto began by
setting very clear strategic priorities envisaging structural reforms. He managed to
convince the most important parties in Congress to sign the “Pacto por México” in
order to pass his reforms. It seemed, in effect, that the Peña Nieto government would
succeed where the two previous PAN governments had failed. In the last few months,
however, the terrible crime of Ayotzinapa shook the public and forced the
government to give more attention to something it had wanted to ignore: the
continued violence that affects the country. In addition, the conflict of interest scandal
involving the president’s wife and his finance minister showed that corruption
continued to be a major problem. These two issues have caused the Peña Nieto
government to divert from its previous reform goals and have had detrimental effects
concerning the prioritizing and organizing of policy measures.
Question
Score
Prioritization
7
The government began 2015 attempting to move beyond these two challenges to
refocus its policy priorities back to the economic reforms. It is not clear whether this
policy shift will succeed, particularly if other massacres occur or other corruption
scandals surface (neither is a far-fetched possibility). This holds especially true in the
economically uncertain condition Mexico has been in since 2014, when the plunging
price of oil squeezed the government’s finances. In 2015, elections will take place in
many states, including the conflict-torn Guerrero and Michoacán. This adds
uncertainty to the political situation as there is a possibility that some of the most
problematic states will be unable to hold elections out of a concern for voters’ safety.
The reforms that Peña Nieto was able to pass through Congress may be difficult to
implement. The main reform that allows for private investment in the oil sector will
probably encounter great obstacles due to the plunging price of oil. The education
system reform has critical opposition in those states where it is most necessary, the
same states where the opposition has been the most radical after the abduction of the
43 students; this will make it much harder for the government to implement the new
policies. Similarly, the government’s telecommunications reform will encounter
Implementation
6
BTI 2016 | Mexico
30
difficulty since the three main actors in the arena are large oligopolies that have
sufficient resources (financial, legal, political) to block parts of the reform or its
outright implementation. Finally, the government’s infrastructure projects depend on
its financial resources, which are threatened by the low price of oil. For 2015, the
government has some financial stability as its oil income has been guaranteed through
an insurance on the price of oil. Even so, the problem will rear itself next year if
things continue as they are at present.
Mexico has always lacked a comprehensive, professional civil service. Although a
civil service law was created during the administration of Vicente Fox (2000-2006),
during the last two presidencies it was more or less rendered ineffective. As such, a
professional civil service exists only in the ministries of Economy, Health and
Foreign Affairs, and in some state institutions and public companies such as the Bank
of Mexico and Pemex. This professionalism applies almost exclusively to midranking functionaries. For example, most of the high and mid-level functionaries of
the Peña Nieto government come from the State of Mexico, where he was governor.
They are part of his government because of cronyism, not because they are experts
in the positions they are now administering.
Most politicians taking government positions lack the preparation to understand the
policies they have to implement, and have little time to learn and innovate. As
changes for political reasons are still very frequent, most high-ranking politicians are
primarily worried about their careers, and thus seek to minimize risk. As most also
hold posts for relatively short durations, they do not have time to learn. As a result,
there is little flexibility and little capacity for learning. Most functionaries are still
more committed to their parties than to their office. The fact that in most posts politics
matters more than knowledge and technical capacity means that there is little learning
from past experience and from best practices at the local or international levels.
One thing that has changed is that there are more and more young Mexicans that have
studied at foreign universities come back to Mexico to serve for some years as direct
consultants to public functionaries or in consulting agencies that have been
expanding over the last years. This trend, however, happens exclusively at the federal
level and within some state administrations such as Nuevo León and Mexico City.
Policy learning
6
BTI 2016 | Mexico
31
15 | Resource Efficiency
Mexico’s administrative apparatus has certainly been modernized, although it still
does not have an extensive civil service (see also 14.3). Democratization has imposed
on the government growing transparency requirements. This has somewhat increased
efficiency and transparency at the federal level. Even so, though there is more
information on corruption and conflicts of interest affairs, the consequences have
been minimal, as most corruption on the federal, state and municipal levels continues
with impunity. Only a couple of governors accused of corruption are in jail, most are
free. Most of the income that the government collected over the previous 10 to 12
years from the exceptionally high price of oil went to current expenditure rather than
to investment projects. Most infrastructure projects – such as the cancelled highspeed train from Mexico City to Queretaro or the new airport in Mexico City – were
decided and launched without being subjected to viability or ecological impact
studies.
Efficient use of
assets
5
At the state and local (municipal) levels, things are much worse. Transparency laws
(if they exist at all) are much less strict at the state level than at the federal level. The
use of public resources in states is totally non-transparent and in many cases totally
corrupt and inefficient. They are mostly used for current expenditures rather than for
forward-looking infrastructure projects. This issue is much worse in the southern,
poorer states than in the northern and richer ones. The debt of states exploded during
the administration of Calderón, tripling or quadrupling in some states, as the states
have autonomy to take on debt. At the beginning of the present administration, a law
was passed to limit the capacity of states to take on debt.
There are serious problems of policy coordination both between and within the
various ministries. Concurrent with democratization was a weakening of the
presidency and empowerment of the governors, leading to a feudalization of political
power and decision-making; this, in turn, led to a lower level of coordination. There
is little coordination between different state secretaries, states, municipalities or even
districts in Mexico City.
This is especially true in the crucial area of security. There are various police forces
in the country, at the federal, state and municipal levels, and little coordination
between them in the fight against crime. Indeed, there is no trust between the police
forces, as municipal and state police have been infiltrated by the drug lords and are,
therefore, rarely informed of operations led by federal police or the army.
The Peña Nieto government sent a law to Congress that eliminated the municipal
police forces and replaced them with a unique force at the state level. It created a
Gendarmerie, an army force under civil command. It is not clear, however, if this will
Policy
coordination
6
BTI 2016 | Mexico
32
be the solution, as the previous military under civilian control, the federal police, has
also suffered from corruption.
At the level of the different government offices, the Peña Nieto administration has
been more efficient than the previous two PAN governments. This is, however, a
specific condition of this government and not the result of a structural change.
Given the top-down nature of most of the government’s policies, they are subject to
resistance and inefficiencies in implementation. A very illustrative example is the
much-needed education reform that was imposed by the government without
educators’ consensus and is likely to result in a fiasco in many states. The teachers’
union has rejected the reform and mobilized protests such that several governors will
probably be forced to cancel it at the state level.
In addition to violence, although they are surely interrelated, Mexico’s biggest
problems are corruption and conflicts of interest. Transparency institutions and the
activity of independent and not-so-independent media and non-governmental
organizations have done much to increase public awareness, though this has not
solved the problem. Corrupt governors and functionaries never land in prison and
very few are forced to resign. The scandal involving the president’s wife and the
finance minister was covered up after both of them “explained” how they acquired
the houses. The public has no access to the patrimonial declarations of functionaries;
in fact, all of them are incomplete.
Although the Federal Institute for Access to Public Information (IFAI) has increased
transparency and permitted Mexicans to learn how some federal resources are used,
in most cases of abuse there is no capacity (or will) to punish the offenders. In
addition, many institutions are not subject to the oversight of the IFAI: trade unions
and most other social organizations, state governments, private companies, the
judiciary, political parties and Congress itself. In many states, IFAI structures are
controlled by the governor or have fewer attributions than their federal counterpart
due to the fact that state laws are weaker.
The fight against criminal gangs has exposed their infiltration in the police and
political and judicial apparatus.
Anti-corruption
policy
3
BTI 2016 | Mexico
33
16 | Consensus-Building
All of the most significant political and societal actors consider democracy important
on principle and no relevant actor is fundamentally against the democratic state. Even
so, there is a growing feeling among the public that democracy is faring badly and
that the political system is blocked, does not recognize the interests of the people and
is incapable of solving their crucial security and economic problems. This means that
if political parties, Congress, or elections continue to be ineffective regarding the
concrete challenges faced by regular Mexicans with regard to jobs, salaries and
security, actors who contest democracy may arise. Although there is a growing public
sentiment that democracy is ineffectual, there is no organized group that has shown
itself capable of uniting to topple the political order. There is fundamental agreement
on the need to solve the rampant corruption and violence that exists in Mexico, but
no consensus on how to proceed.
Consensus on goals
8
As the Mexican economy has shown very clear limits to its capacity to grow, create
jobs and better the lives of most Mexicans, there has been rising criticism regarding
the limits of the market economy. Parallel to what is happening in public opinion on
democracy, there is growing disappointment with the economic policies that have
been pursued over the last 30 years. The idea that the market alone cannot benefit all
has resonated strongly among a significant number of Mexicans. If the present liberal
market economic model (inspired by economic ideas from the United States) does
not deliver a better life to Mexicans, some actors might contest the market economy.
However, there is no explicit alternative nor any organized group that has shown
itself capable of uniting to change the economic system. One exception is Morena of
López Obrador, which is a significant electoral force but has been marginal in the
definition of public policy.
If the drug cartels and organized crime are included, Mexican reformers only have
partial control over powerful anti-democratic actors. Guerrilla groups exist in Mexico
but are still marginal. Recent events in Guerrero and Michoacán, where armed selfdefense groups have been established to challenge the drug cartels, and the movement
of families, friends and other supporters that mobilized in response to the abduction
of the Ayotzinapa students, have introduced new uncertainties. In Guerrero, popular
movements are demanding that the elections be cancelled. In addition, from the
massive demonstrations on 1 December 2012, when Peña Nieto took office, to the
most recent ones in Mexico City demanding the return of the Ayotzinapa students,
groups of young anarchists have appeared. Although these movements have created
complex situations in some localities and at some specific moments, they have not
spread to the general population. Nonetheless, they point to a potential danger if
violence, impunity and corruption cannot be checked in the next years. Though very
critical of the existing system, López Obrador and his movement have never called
for violence or for a toppling of the existing institutions.
Anti-democratic
actors
5
BTI 2016 | Mexico
34
The main danger to democracy, however, comes from the drug cartels and other
criminal organizations. They are using their financial resources to infiltrate political
spheres, police forces and maybe even the armed forces. They are thus a double
danger for democracy: directly, as they infiltrate party politics, and indirectly,
because the violence and presence of the army in the streets dampens collective action
and is even endangering the elections in a few states and localities.
Although in Mexico the indigenous population has been and still is mostly
marginalized and discriminated against, excepting the Chiapas Zapatista rebellion of
2005, there has not been a violent conflict along these lines, nor along religious ones.
Nonetheless, there is a clear-cut class cleavage between those that have benefited
from the new economy model and those that have not. Many, particularly the poor,
have seen their condition become more insecure in both socioeconomic and security
terms. Up until now, the political system has been capable of channeling this latent
conflict.
Cleavage /
conflict
management
5
Lopez Obrador represented these sectors of society, but now the left is divided
between the PRD and Morena, a fact that bodes badly for the next elections and for
the capacity of the party system to represent the “losers” of the current economic
model. With the increasing delegitimation of the political system, some of these
dissatisfied segments of the population may rise up. Protagonists are the anarchist
movements, the students and teachers’ movements in Ayotzinapa and the citizens
that arm themselves in order to protect their towns from the drug cartels.
The Mexican leadership only sporadically involves civil society and only takes into
account the interests of a few civil society actors. The 1990s brought transparent
elections, the end of the interventionist state and deregulation. With this turn,
corporatist organizations lost most of their power within the PRI, as well as their
capacity to negotiate with the government and the private sector (in the case of
unions). As a result, they lost legitimacy in the eyes of their members and, although
they still exist, they are, in many cases, “empty shells.” Although a large number of
autonomous civil society organizations (CSOs) have emerged over the same period,
the total number are still very small compared to other countries of Mexico’s size. As
a result, civil society in Mexico is weak. The country’s CSOs are either part of the
political establishment or disconnected from politics, in both cases they do not have
the power to influence politics or policies. Political parties are inimical to social
organizations they cannot co-opt and the parties that have emerged through social
organizations have not gathered enough votes to survive their first election and have
disappeared.
Finally, in the face of increasing violence, insecurity and the impunity that
characterizes Mexico, participation in social organizations and journalism have
become very dangerous, a fact that discourages people from organizing, denouncing
or being active.
Civil society
participation
5
BTI 2016 | Mexico
The question of reconciliation was only posed during the first non-PRI government,
when there was a discussion on whether a “truth commission” should be created to
investigate the government’s crimes against students in 1968 and 1971 as well as the
“dirty war” against the guerrillas in the 1970s. The government named a special
prosecutor to study these cases, but the results were nominal and did not satisfy the
groups demanding reparation. During both the Calderón presidency and the present
Peña Nieto administration this issue has been completely forgotten. At the end of the
Calderón presidency and the beginning of the present administration, the movement
of victims of violence (MPJD) led by the poet Javier Sicilia demanded and
successfully persuaded Congress to pass a Law of Victims, intended to compensate
and protect the victims of violence during the “war on drugs” and their families.
However, the results have been far from satisfactory.
35
Reconciliation
5
17 | International Cooperation
In key areas, a coherent development strategy is not readily evident, apart from a
general commitment to the established economic model and to democracy. The
structural reforms envisaged by the present government have increasingly become
impaired by the violent security issues it had wished to subordinate to these goals.
Although it shares many of the problems of poorer countries, Mexico receives
practically no foreign aid, as it is a full-fledged partner of NAFTA and a member of
the OECD. According to OECD statistics, Mexico was the recipient of official
development assistance (ODA) amounting to a net total of $561 million in 2013. This
included German technical cooperation focusing on ecology, sustainability and
resource efficiency. Some state governments have gained access to very specific aid,
such as to fight pollution, preserve nature, and protect plant and animal species.
However, corruption and the lack of an effective bureaucracy cast some doubts on
the governments’ capability to use the little access it has to foreign aid effectively.
The government of Calderón received support and financial aid for its “war” against
the drug cartels in the context of the “Merida Plan,” which has been “frozen” by the
present government. The Peña Nieto administration has, however, put greater
emphasis on attracting foreign investment.
Effective use of
support
During its first year in government, the Peña Nieto administration achieved the
highest international credibility of a Mexican government since the Fox
administration (the first government of the transition) and the Salinas government
(for its reforms and NAFTA). The Peña Nieto government signed a pact with the two
other significant parties in Congress and passed a series of important reforms in
energy, education and fiscal policy. For this reason, he was hailed by many journalists
and governments as a great statesman. This image of Peña Nieto and of Mexico
totally collapsed with the disappearance and killing of the 43 students in Ayotzinapa,
Credibility
7
7
BTI 2016 | Mexico
36
the corruption scandals of Peña Nieto, and the cancelling of the high-speed train to
Queretaro.
Nevertheless, in general terms, Mexico is considered to be a reliable partner
internationally, as it cooperates with most significant international organizations. It
is a member many international organizations, including the WTO, IMF and World
Bank. Mexico has numerous free trade agreements with diverse markets, including
Europe and Japan. It is considered to be a serious partner for foreign capital as it
respects the market, private property and democracy. Nevertheless, the persistence
of corruption and the increased levels of violence are becoming an increasing concern
for these international actors.
Mexico has had a free trade agreement with the United States and Canada since 1994,
and is considered a reliable partner. In contrast, although the country has friendly
relations with its Central American neighbors, no integration efforts have been
developed. In recent years, there have been frictions with some of the governments
in this region (Guatemala and El Salvador) as many of the migrants that cross Mexico
to go to the United States suffer serious abuse at the hands of the Mexican police,
migration authorities and criminal gangs. Rampant violence in some parts of the
country questions whether the government is able to control the situation. There is
covert and overt cooperation with the United States in the “war on drugs.” Mexico
gets information from the United States on drug cartels and extradites gang lords.
The United States has imposed its vision of how to deal with the drug problem, as a
criminal one, since the 1960s.
Regional
cooperation
8
BTI 2016 | Mexico
Strategic Outlook
Mexico’s most crucial challenges include corruption, violence, rampant inequality and a weak
economy that does not create enough jobs for the young Mexicans entering the labor market.
Endemic corruption combined with a police force which is badly paid, and thus more easily
corrupted, have contributed to almost total impunity for criminals. As a consequence, crime and
violence have become endemic in some parts of the country. The explosion of violence since 2007,
however, is mainly due to failed policies launched in the previous Calderón administration (2006
to 2012) against the drug cartels. The government’s strategy to attack the drug cartels when the
state could not count on its own police, judicial apparatus nor control its prisons proved to be
suicidal.
To be successful, the fight against the drug lords would require the professionalization and
reorganization of the police forces, a strengthening of the government’s intelligence capacity, and
a change of focus from stopping drug trafficking to weakening the cartels’ financial and arms
capacities. In addition, such a policy should be accompanied by programs to prevent drug
addiction as well as create social safety nets and economic opportunities that counter the cartels’
capacity to root themselves in society. Such a holistic strategy would make it possible to withdraw
the army from the fight against drugs. This is a critical component, as the military’s deployment
entails its own dangers, including human rights violations and increased interference by the army
in civilian political matters.
The fact that the Mexican economy plunged almost 5% over the course of the global economic
crisis demonstrated the fragility of the country’s economy, which is largely due to its dependence
on the U.S. market. The structural current account deficit and the rapid increase of Mexico’s total
foreign debt proved that an economic model mainly oriented toward exports is inadequate for a
country of its size. Based on maintaining low wages, this model accounts in part for an anemic
domestic market with poor capacity to integrate new technologies that might improve productivity
and stimulate endogenous scientific and economic change. Instead, the government should focus
on developing the domestic market and stimulate small and medium-sized businesses through
aggressive and well-structured programs and financial resources.
The majority of Mexicans have not profited from the current economic model, provoking deep
dissatisfaction with democracy itself. This should push the Mexican government to profoundly
reform and massively invest in the country’s education and health care systems. A more
sustainable economic model will also require aggressive R&D investments. In order to have the
resources to invest in human capital, the government should modernize its state apparatus and
carry out a more profound fiscal reform than the one undertaken by the current Peña Nieto
government.
37